- Santos raises interest to 21% with $189m acquisition
- $4bn cost savings cut project capital expenditure to about $14bn
The French energy giant said on Monday that it would retain a 20 per cent interest in the project after selling shares to its partners in proportion to their existing holdings. The company did not disclose the value of the transaction.
The move marks a significant change in the ownership and operational structure of Papua LNG as the partners prepare for a final investment decision, which is expected in the fourth quarter of 2026.
Australia's Santos confirmed that it would acquire an additional 3.3 per cent interest for $189 million, increasing its overall stake in the project to 21 per cent.
The acquisition is expected to raise Santos' equity liquefied natural gas production by about 19 per cent, to approximately 1.2 million metric tonnes per annum.
Santos said completion of the transaction remains subject to Papua LNG reaching a final investment decision.
TotalEnergies, however, said the contractual and commercial issues that had previously needed to be resolved ahead of the decision had now been cleared, strengthening expectations that the project is moving towards the investment approval stage.
ExxonMobil takes over operatorship
Under the new arrangement, ExxonMobil will become operator of Papua LNG, adding the project to its existing operations in Papua New Guinea.
ExxonMobil already operates the neighbouring PNG LNG project, making the transfer potentially significant for coordination between the two developments.
An ExxonMobil spokesperson said the arrangement could improve operational coordination and execution.
"Bringing Papua LNG and PNG LNG under ExxonMobil operatorship is expected to strengthen alignment across the projects, improve execution efficiency, and support the development of Papua New Guinea's world-class LNG resources," an ExxonMobil spokesperson said.
The company is expected to use its experience operating PNG LNG to support the development and eventual production phase of Papua LNG.
5.6Mtpa production planned
Papua LNG is one of TotalEnergies' projects aimed at expanding its portfolio of lower-cost liquefied natural gas supplies.
The project is designed to produce 5.6 million metric tonnes of LNG annually from the Elk and Antelope gas fields in Papua New Guinea's Gulf Province.
Most of the output is expected to be sold to Asian markets, where demand for LNG remains a major component of the region's energy mix.
TotalEnergies' offtake position in the project will remain unchanged despite the reduction in its equity interest. The company will retain access to approximately 1.5 million metric tonnes per year of LNG for its global portfolio.
$4bn savings achieved
The project has also undergone significant cost restructuring as the partners seek to improve its economics before the final investment decision.
TotalEnergies said it had completed the tendering process for the engineering, procurement and construction work, with contracts now awaiting approval from the project's partners.
The company said nearly $4 billion in cost savings had been achieved since 2024 through the rebidding of contracts and optimisation of the project's design.
Those measures have reduced projected capital expenditure to approximately $14 billion.
The cost reductions are particularly important for a large-scale LNG development, where construction expenses, financing requirements and long project timelines can significantly affect returns.
New gas agreement, marketing venture
The project partners have also completed an amended gas agreement with the government of Papua New Guinea, clearing another major requirement ahead of the investment decision.
In addition, the companies have established an LNG marketing joint venture with Kumul Petroleum to market 2.4 million metric tonnes per year of Papua LNG's planned 5.6 million-tonne annual production.
The arrangement gives Papua New Guinea's state-linked petroleum interests a more direct role in the commercialisation of the country's gas resources.
Papua LNG is jointly owned by TotalEnergies, ExxonMobil, Santos, Kumul Petroleum/MRDC and ENEOS Xplora.
For TotalEnergies, the restructuring allows it to reduce its direct equity exposure while maintaining a substantial 20 per cent interest and preserving its planned LNG offtake.
For Santos, meanwhile, the additional 3.3 per cent interest provides an opportunity to expand its exposure to the Papua New Guinea LNG sector and increase its expected equity production.
With cost savings achieved, commercial and contractual issues addressed, construction contracts tendered and ExxonMobil preparing to assume operatorship, the partners are now focused on securing the final investment decision later in 2026.
The decision will determine whether Papua LNG moves into full-scale development and ultimately towards production of 5.6 million tonnes of LNG annually from Papua New Guinea's Gulf Province.